Continuing a nationwide trend, three states recently enacted new legislation further restricting the enforceability of non-compete provisions in employment agreements. Starting in July, these new regulations are set to take effect in Virginia, Arkansas, and Wyoming.
Virginia Bars Non-Competes With Non-Exempt Employees
Virginia’s existing non-compete statute prohibits employers from entering into, enforcing, or threatening to enforce non-compete agreements with “low-wage employees.” A “low-wage employee” means an individual who earned less than Virginia’s average weekly wage (currently $1,463.10 per week).
Effective July 1, 2025, Virginia has expanded the definition of “low-wage employees” to include employees who are entitled to overtime compensation under federal law for any hours worked in excess of 40 hours in any one workweek, regardless of their average weekly earnings. In other words, under Virginia law, it will soon be illegal to enter into non-compete agreements with non-exempt employees.
The expanded definition of “low-wage employees” applies only to contracts entered into or renewed after July 1, 2025.
Arkansas Prohibits Physician Non-Competes
Currently, Arkansas law permits non-compete agreements that are ancillary to employment relationships, to the extent that (1) the employer has a protectable business interest; and (2) the non-compete restriction is limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest of the employer.
Pursuant to a recent amendment to the statute, the law will void non-compete agreements that restrict a physician’s ability to practice within the physician’s scope of practice. Under the law, a physician is defined as “a person authorized or licensed to practice medicine” under the Arkansas Medical Practices Act or a person authorized to practice osteopathy under applicable state law.
It is unclear whether this amendment applies retroactively to non-compete provisions entered into before the effective date or only prohibits physician non-competes prospectively.
The bill, titled “To Clarify That a Covenant Not to Compete Agreement Is Unenforceable for Certain Licensed Medical Professionals," was signed into law by Governor Sarah Huckabee on March 4, 2025 and is set to take effective 90 days after the conclusion of the current legislative session.
Wyoming Enacts Non-Compete Ban for Non-Management Personnel
Earlier this month, Wyoming joined the growing list of states to generally ban most non-competition agreements.
Effective July 1, 2025, covenants not to compete will be void in Wyoming except in specific circumstances, including agreements protecting trade secrets, the purchase and sale of a business, and contracts binding executive and management personnel, as well as professional staff to executive and management personnel. The statute does not define “executive and management personnel,” leaving it unclear as to how far this exception stretches.
The new law also specifically bars non-compete agreements for physicians.
Despite these prohibitions, the law permits provisions that allow employers to recover expenses for relocation, education, and training, though the amount of recovery for these expenses decreases based on the employee’s length of service.
The law applies only prospectively to contracts entered into on or after July 1, 2025.
Over the last several years we have seen many states enact limitations on the use of non-competition clauses and other restrictive covenants, which is a trend that will presumably continue for the foreseeable future, especially in light of the failed 2024 FTC rule that would have eliminated non-competes on a nationwide basis. Employers, especially those with operations in multiple states, should continue to stay apprised of legislative developments to ensure their form agreements remain compliant and enforceable.
